FairTax Summit in Florida

Hello!

With the recent national media attention on tax reform alternatives we believe we are quite close to the tipping point on fundamental tax replacement. Our website has taken thousands of hits. Our 800 number is ringing off the wall. There is no question the time for positive action is now. We are working with both Presidential candidates staff and expect to get a senior surrogate speaker from both Bush and Kerry. The American people demand a fair and simple federal income and Social Security tax system. Come to Florida and make your views known.

We intend to keep this fire alive.
So we are having a conference, in Florida, in September, when the press will be crawling all over the state due to the hotly contested presidential and senatorial elections. And we'd like you there with us.

2004 Tax Policy & Jobs National Leadership Conference
September 17 through 19, 2004
Orlando, Florida
An invitation to attend

Why? Grassroots leadership is the key to actually moving reform forward. This conference brings together the top national, regional, and state leaders in tax policy, job growth, and economic development. We will examine the current alternatives to educate the grassroots and Congress in tax systems that make our country's goods more competitive at home and abroad, and provide sufficient funding for the reform and assurance of our Social Security system, while ensuring economic opportunities and stability for, and the welfare of, low-, lower middle-, and fixed-income Americans.

Our current tax system exports American jobs rather than American products.

The current income tax system drives up the cost of American manufactured goods and agricultural commodities, to say nothing of its complex, intrusive, inefficient, special-interest-driven nature. Not only does the current system decrease our competitiveness overseas, it increases domestic prices for those who can least afford to pay. Funding Social Security reform is almost as daunting as reform itself. The Social Security system is supported by a narrow, regressive payroll tax, levied heavily on low- and lower middle-income Americans. While Social Security system reform is clearly necessary, this is not the purpose of this conference. Determining a responsible, long-term funding solution for Social Security reform is a purpose for this conference.

Result? Bring job creation and Social Security reform-friendly tax policy to the forefront of our national economic debate.

Who? The Tax Policy & Jobs Conference is sponsored by National Tax Research Committee.

When? September 17 through 19, 2004

Where? Gaylord Palms Resort & Visitors Center, Interstate 4 @ Osceola Parkway East (Exit 65), Kissimmee (Orlando), Florida, right across the freeway from Disney World

Data for attendees

Very best regards,
Tom

Thomas A. Wright
Executive Director
FairTax.org
tom@fairtax.org
www.fairtax.org
1-800-FAIRTAX

Contributions to Americans For Fair Taxation are not tax deductible because we lobby for you in Washington, D.C.

Golly, for someone you are willing to bet the entire economic future of this country on, this Jorgenson guy must be really gullible to fall for that Gale guy's BS. If he's not smart enough to recognize what you believe are Gale's errors, maybe he's not smart enough to recognize his own. Can we trust anything he believes?

Better to ask if we can trust anything you believe. Seeing that the particular paper your quote is from had a bit more input than just Jorgenson's

National Bank of Belgium
Working Papers - Research Series
Lifting the Burden and U.S Economic Growth
Dale Jorgenson Harvard University, United States
Kun-Young Yun, Yonsei University, Seoul Korea
Working Paper No. 21 May 2002.
Editorial Director
Jan Smets, Member of the Board of Directors of the National Bank of Belgium

and does not analyse HR25 or any retail sales tax at all, only mentioning the existance of retail sales tax proposals and reference the two Gale/Brookings pieces.

The Jorgenson quote I posted was from 2002, not 1997. I assume he got smarter

The paper you quote only addresses VATs and Flat Taxes in its actual model studies for mainly european consumption and uses '96 tax law as its reference to boot. I don't figure Jorgenson himself really look all that close at the Gale paper. For all we know, Kun-Young Yun or the editor Jan Smets had more to do with the reference than Jorgenson.

I rely on Jorgenson's actual modeling not passing references to papers I know do not address the actual parameters of the legislation in HR25.

Also, this is from an unpublished report to the AFFT. Why won't they publish it?

Published, here's your cite go get it. But then you already know that.

Replacing the Federal Income Tax, The Economic Impact of Taxing Consumption: Hearings Before the House Committee on Ways and Means (Vol. II), 104th Cong., 2d Sess., (statement of Dale Jorgenson, Ph.D., Chairman Harvard University, Department of Economics on March 27, 1996, at p. 105) (reprinted in Joint Economic Committee, Roundtable Discussion on Tax Reform and Economic Growth, 104th Cong., 1st Sess. 1996 at. p. 79).

Hmmm...another unpublished source being held by the AFFT. Why don't they want us to see it?

Ask em for it, a simple email to them will get a copy for you. http://www.fairtax.org

How do we know it's a "qualitative study"?

Actually its a quantitative study. But that's ok, typo on my part. By asking them for a copy.

And 23.1% seems low considering in 1997 he said the rate would be 17.2% without replacing payroll taxes and without a demogrant. source

Hmm, going to the source tells me they computed on '91 tax revenue & economic data, and from all I tell from your source, that rate is most probably the a tax exclusive value for sales tax, (tax inclusive for comparison purposes with HR25 & income tax rates would be 14.67%) much closer to Jorgenson's number for a similar NRST based on '96 tax law replacement of just the income tax without a demogrant.

[What a coincidence! I was just checking my mail and Jim Poterba happened to send me a letter stating that the required rate for a NRST was well over 40%.]

I always find it interesting that you feel it necessary to impune the integrity of working professionals and those who disagree with you.

Did any of these economist factor in the Transitional Inventory Credit?

Why would the factor in a transitional (i.e. temporary) cost better addressed through appropriations adjustments than long term tax rates.

How about the increase in Social Security payments required in the bill (and you said it wasn't a spending bill)? No? Hmm.

What increase? With shelf price plus tax showing a fall 3-10% one should expect Social Security payments to rise more slowly than they would otherwise. That is the outcome of the Jorgenson model and well accounted for.

If they did then maybe they would realize that the FairTax rate

Obviously increasing SS payments are not a factor, so you assumption of

"must be increased substantially above the levels proposed by the authors of the plan."

Falls rather flat. Especially considering that the Gale/Brookings policy papers do not address HR25 as written at all.

U.S. workers are in no position to bargain because, in both the U.S. and the global economy, there is a vast surplus of labor for hire—at wages lower than Americans are able or willing to work.

The law of supply and demand applied to price works for goods or services but is iffy for workers' wages.

Workers use that "price" they are paid to purchase goods and services from businesses other than the one(s) they work for. Other workers purchase from the one they work for.

If their "price" is low, they can't make the purchases. The companies that make the items to be purchased will have to lower their item price or die. They can only lower the item price by the amount of what they "saved" on the "price" of their labor without cutting into their actual profits. Which probably means, the way people are, the businesses won't give up all the "savings", so the number of people who can afford some item will decline.

This is all fine and good for flyover country, but all this means less money going to the governments, in addition to the amount they are losing because of the movement of jobs overseas. This is not to mention the state taxes lost for the items not bought here by overseas workers at the state level.

The movement of jobs overseas lost not just income taxes for the missing workers, but will lose more taxes to diminished wages of those who still are here.

Fortunately, the gov's savior appeared just when it needed it (imagine that). It can have it's high revenue for expensive socialist programs and globalizing free trade, too!

It can implement a NRST.

The law of supply and demand applied to price works for goods or services but is iffy for workers' wages.

Absolutely, that is why price move more easily(i.e. have more elasticity) than wages, and why prices under an NRST would change substantially more than wages would as business income and payroll taxes are repealed.

. The companies that make the items to be purchased will have to lower their item price or die. They can only lower the item price by the amount of what they "saved" on the "price" of their labor without cutting into their actual profits.

The repeal of business taxes, removes both the tax paid per-se as well as the costs associated with tax planning, accounting, reporting, litigation and research. Thus on repeal of income and payroll taxes revenues are released that can go toward the most productive use by the company in a competitive market.

The price of labor is barely an issue. The employee retains the receives the same gross wage he is hired for with consequent higher "take home pay" ( no tax witholding).

Where competition exists for market share the predominate change will be in downward pressure on the initial shelf price of products embedded with business tax burden coming into equilibrium with a new total cost (retail sales tax plus price without embedded burdens) after implementation of the replacement tax at approximately the same level.

The movement of jobs overseas lost not just income taxes for the missing workers, but will lose more taxes to diminished wages of those who still are here.

Any reduction of product prices is a result of repeal tax burdens, not changes in gross wage. In fact actual takehome pay for the employee will be higher as that person would no longer payout withholding or SS/Medicare taxes which are repealed by HR25.

This is all fine and good for flyover country, but all this means less money going to the governments

Lowering tax burdens and placing control of his own income into the hands of the individual can mean that, obviously.

Federalist #21:

"Imposts, excises, and, in general, all duties upon articles of consumption, may be compared to a fluid, which will, in time, find its level with the means of paying them. The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal; and private oppression may always be avoided by a judicious selection of objects proper for such impositions. "

"It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess.
They prescribe their own limit, which cannot be exceeded without defeating the end proposed - that is, an extension of the revenue."
When applied to this object, the saying is as just as it is witty that, "in political arithmetic, two and two do not always make four."
If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds.
This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.

Taxes & Government Spending:

"The income tax in effect makes us vassals to the government – the politicians decide how much income we can keep. No mere “reform” of this slave tax, such as flattening the rate, can correct its fundamental denial of control over our own money. Only the abolition of the income tax itself will restore the basic American principle that our income is both our own money and our own private business - not the government's."

"Replacing the income tax with a national sales tax would rejuvenate independence and responsibility in our citizens. True economic liberty and moral revival go hand in hand."

"A national sales tax would also put the American citizen back in control of national fiscal policy. The best way to curtail government spending is to cut taxes, because they can’t spend what they don’t get. But with a sales tax, we could deny funds to a spendthrift government – and give ourselves a tax cut – whenever we make the private choice to alter our spending and saving habits."

The movement of jobs overseas lost not just income taxes for the missing workers, but will lose more taxes to diminished wages of those who still are here.

Hmm, good description of what is happening under NAFT and the current income payroll tax systems driving businesses away.

Has little to do with a National Retail Sales Tax that assures that imports share the same tax burden as domestic manufacture instead of less as they do today, and our exports gain advantage on repeal of business taxes by the removal of those taxes from producer pricing.

In fact the actual case to be made is that there will be a strong inflow of new manufacturing to the US under a National Retail Sales Tax system.

Chairman of the House Ways and Means Committee,
Rep. Bill Archer (R-TX)
August 12, 1996

"A recent survey was done, in Europe and Japan, of the major corporations and I was astounded at the results. They were asked, 'If the US abolished its income tax and went to a sales tax, would that have any impact on your decisions?' Eighty percent of the corporations said they would build their factories in the United States of America. Twenty percent said they would move their international headquarters to the United States of America."

I KNEW IT! I knew you wouldn't find that a totally BS number.

Why should I find a release of $1.3 Trillion in a $12 Trillion dollar economy unreasonable, that is only 11% due to a combination of factors.

For a simple 15% NRST replacing only federal income taxes:

"Under the Flat Tax the GDP is only 0.6 percent higher than the Base Case in 1996; the impact of this tax reform on GDP gradually rises, reaching 1.3 percent in 2020. Under the Sales Tax the GDP jumps by 13.2 percent in 1996, but the impact gradually diminishes over time, falling to 9.0 percent in the year 2020."
*** snip ***
The Sales Tax produces substantial increases in output levels for most industries shown in Figure 15 for 1996. This reflects the size of the impact for the Sale Tax on overall economic activity. By 2020 the changes in outputs of the individual industries have increased by around fifteen percent, again reflecting the impact on aggregate economic activity. The Flat Tax results given in Figure 15 for 1996 are much more modest; increases in the outputs of industries oriented toward consumption are partially offset by decreases in the outputs of industries contributing to investment. By 2020 the Flat Tax produces modest increases in almost all industrial sectors.
Jorgenson/Wilcoxen 1999

What is totally BS is your belief that anyone would figure that remainder had to be due solely to cost of compliance on business and not productivity and growth factors as well.

There's not a number high enough for you to think it unreasonable!

Sure there is, but not this number, for it is consistent with the general equilibrium models that Jorgenson/Wilcox study used to evaluate tax reforms.

You are delusional.

Hmmm. Appeal to Ridicule, followed by an adhominem appeal to ridicule

The Appeal to Ridicule is a fallacy in which ridicule or mockery is substituted for evidence in an "argument." This line of "reasoning" has the following form:

X, which is some form of ridicule is presented (typically directed at the claim).
Therefore claim C is false.

This sort of "reasoning" is fallacious because mocking a claim does not show that it is false. This is especially clear in the following example: "1+1=2! That's the most ridiculous thing I have ever heard!"

You are losing it YN.

From the good doctor:

"Since producers would no longer pay taxes on profits or other forms of income from capital and workers would no longer pay taxes on wages, prices received by producers under the Sales Tax would fall by an average of twenty percent in 1996."

Don't see anything in there about productivity gains or growth factors.

I suggest you read more as the feedback of productivity & efficiency gains arising from these factors create additional room for price reductions, along with as the pressure of diversion of funds into investement creating the pressure for such drops in prices?

As definitely is in place and playing its roll according to that same good doctor,

"The impact of the Flat Tax in 1996 is to depress investment by 8.6 percent, relative to the Base Case. Investment recovers over time, eventually reaching a level that is only 1.7 percent below the Base Case in the year 2020. Substitution of the Sales Tax for existing income taxes generates a dramatic investment boom. The impact in 1996 is a whopping 78.5 percent increase in the level of investment that gradually gives way by the year 2000 to a substantial increase of 16.5 percent, relative to the Base Case. "

Which results in lessing of demand for products in favor of savings and investment relative to the '96 income tax Base Case. Lower demand coupled with lower taxation on businesses, lower costs, higher productivity yield lower prices with higher real economic growth.

I suggest a refresher course in economics for you.

On subjects one does spends the time in necessary scholarship, a person can point to correct analysis as argument.

Debates are most often lost by those who merely express ad-hoc opinions and poorly based personal beliefs as argument.

Necessary scholarship? Correct analysis? Let's take a look at your "scholarship" and "analysis."

Do you remember this? (How could we forget, you post it a dozen times a day.)

The Federal Tax System
http://www.cbo.gov/showdoc.cfm?index=2125&sequence=0&from=1#pt1
From the Table 1 we may extract the proportionate contributions of each sector of taxes as they contribute to consumer price for the year 2000.

Total revenues collected by Feds in '00 = $1945billion ( 33.6% of consumer price)

Those tax components which will not change prices as a consequence of enactment of HR2525

Individual Income Tax(Labor) = 945billions,
Employee half of Social Insurance = 653/2 = 326.5billions,
Excises = $68billion
Customs Duties = $19Billion
Miscellaneous = $40Billion

============================

Total constant price factors = $1358.5 billion
Remainder federal tax components affecting price = (1945-1358.5) = $586.5billions

Adjust for the approximate reduction of interest & cost of tax compliance (
Adjust for a conservative $800 billion cost of tax compliance, (The Flat Tax; Hall & Rabushka, '95,What the Income Tax Costs the American People: quoting James L. Payne estimates 65cents for each dollar of revenue collected).

Total tax related factors affecting consumption price = (800 + 586.5) = $1386.5billions

Estimated change in consumption prices as consequence of enactment of a National Retail Sales Tax, repealing all business income and payroll taxes:

33.6*(1386.5/1945) = 23.9% reduction in consumption prices

Which more than verifies the Jorgenson empirical study of 22% fall in producer prices.
The two sources are in reasonable agreement, and I see 20-25% a reasonable value to expect retail prices to fall, not only for customers here in the United States, but in our exports as well making them far more competitive on international markets.

For some reason you are using 2000 estimates from 1999 and your "consumer price" is way off. Let's take a look at with the real numbers.

Total revenues collected by Feds in '00 = $2,025 billion (26.5% of consumer price)
    [For some reason you were using the consumer price that was reduced to account for the FCA. Funny.]

Those tax components which will not change prices as a consequence of enactment of HR2525

Individual Income Tax (Labor) = $1,004.5 billions,
Employee half of Social Insurance = 648/2 = 324.0 billions,
Excises = $68.9 billion
Customs Duties = $19.9 Billion
Miscellaneous = $42.7 Billion
Estate and Gift taxes = $29.0
    [You also didn't include the Estate and Gift taxes in the "constant price factors." Nice "scholarship."]

============================

Total constant price factors = $1,489.0 billion
Remainder federal tax components affecting price = (2,025 - 1,489) = $536 billions

Adjust for the approximate reduction of interest & cost of tax compliance (
    [WTF is this? More quality "scholarship" from AG.]
Adjust for a conservative $800 billion cost of tax compliance,
    [This $800 billion number is total BS. It's from the mid-80s and I'm sure it was questionable then. But I'll let you have it for now.]

Total tax related factors affecting consumption price = (800 + 536) = $1336 billions

Estimated change in consumption prices as consequence of enactment of a National Retail Sales Tax, repealing all business income and payroll taxes:

26.5*(1,336.5/2,025) = 17.48% reduction in consumption prices

Which more than verifies the Jorgenson empirical study of a 22% fall in producer prices is total crap when applied to consumer prices.

So, when correct numbers are used, your method produces a drop of 17.48%, not 23.9%!

So now we have exposed yet another one of your cut & pasties to be in error. There are still a lot of flaws in this analysis. The actual percentage would be much lower, but I just did this as an example of how poor your "scholarship" is.

Do you remember this?

Certainly, though you left out some key information from it (apparently overlooked), which is undoubtedly why you got a bit confused as to the 33.6% contribution to consumer prices by federal taxes and thus miscalculated your improperly corrected version.

So I'll just go ahead and add what you left out of your partial quotation of the original to get things back into proper perspective and provide some explainatory commentary to assure you understand the numbers used there and an erroneous line leftover from editing.

I refer you to the section of the following article about the Income/Payroll tax system and its impact on our economy "A. Hidden Upstream Taxes. " paragraph 39.

"[39] Dr. Dale Jorgenson, Chairman of Harvard University's Economics Department, believes that the price of goods and services are inflated by about 20 percent or more by upstream taxes consumers ultimately bear. In a recent paper Dr. Jorgenson estimated the built-in taxes contained in the price of goods and services. /22/ In the chart above, he quantified the hidden component of tax, estimating that producer prices would fall on repeal of upstream taxes an average of about 22 percent."

Looking at the accompanying chart, the range of values from industry to industry appears to be about 12-25%.
Economists Gary and Aldonna Robbins of the Texas-based Institute for Public Policy examined the case of dry cleaning a shirt, with a particular eye toward uncovering the hidden costs of taxes in price.
The Robbin's attributed over 33.6% of "consumer prices" to be due to federal taxation passed on to the customer.
The Federal Tax System
http://www.cbo.gov/showdoc.cfm?index=2125&sequence=0&from=1#pt1
From the Table 1 we may extract the proportionate contributions of each sector of taxes as they contribute to consumer price for the year 2000.

Total revenues collected by Feds in '00 = $1945billion
(equals 33.6% of consumer price [ Robbins '99 estimated federal tax contribution to price])

Those tax components which will not change prices as a consequence of enactment of HR2525

Individual Income Tax(Labor) = 945billions,
Employee half of Social Insurance = 653/2 = 326.5billions,
Excises = $68billion
Customs Duties = $19Billion
Miscellaneous = $40Billion

============================

Total constant price factors = $1358.5 billion
Remainder federal tax components affecting price = (1945-1358.5) = $586.5billions

~~Adjust for the approximate reduction of interest & cost of tax compliance (~~
[ sorry to confuse you, just an editing error]
Adjust for a conservative $800 billion cost of tax compliance, (The Flat Tax; Hall & Rabushka, '95,What the Income Tax Costs the American People: quoting James L. Payne estimates 65cents for each dollar of revenue collected).

Total tax related factors affecting consumption price = (800 + 586.5) = $1386.5billions

Estimated change in consumption prices as consequence of enactment of a National Retail Sales Tax, repealing all business income and payroll taxes:

33.6*(1386.5/1945) = 23.9% reduction in consumption prices

Which more than verifies the Jorgenson empirical study of 22% fall in producer prices.
The two sources are in reasonable agreement, and I see 20-25% a reasonable value to expect retail prices to fall, not only for customers here in the United States, but in our exports as well making them far more competitive on international markets.

Let's take a look at with the real numbers.

Fine and thanks for the updated numbers and an link so we can use measured final revenue numbers, as opposed to the old CBO projection for 2000 when the original validation was done.

Hmmm, noticed you inadvertantly included Gift/Estate taxes into the group of revenue sources not affecting prices.

Not sure I can agree with that as I originally left it as a factor inducing price variability as it appears to me to be of most concern to small family businesses and farms, the tax hitting the generation to which the business is passed increasing the costs attributable to those business elements, while larger businesses and wealthy more estate planned folks tend to pass such properties through corporations and trusts to avoid those impositions.

However I'll leave it as you seem to want it in the fixed group and the calculation validates the premise that the Jorgenson level of 22% price reductions are achievable even from a static analysis for HR25 regardless.

So onto the correct methodology and numbers:

I refer you to the section of the following article about the Income/Payroll tax system and its impact on our economy "A. Hidden Upstream Taxes. " paragraph 39.

"[39] Dr. Dale Jorgenson, Chairman of Harvard University's Economics Department, believes that the price of goods and services are inflated by about 20 percent or more by upstream taxes consumers ultimately bear. In a recent paper Dr. Jorgenson estimated the built-in taxes contained in the price of goods and services. /22/ In the chart above, he quantified the hidden component of tax, estimating that producer prices would fall on repeal of upstream taxes an average of about 22 percent."

Looking at the accompanying chart, the range of values from industry to industry appears to be about 12-25%.
Economists Gary and Aldonna Robbins of the Texas-based Institute for Public Policy examined the case of dry cleaning a shirt, with a particular eye toward uncovering the hidden costs of taxes in price.
The Robbin's attributed over 33.6% of "consumer prices" to be due to federal taxation passed on to the customer.
http://fms.treas.gov/mts/mts0901.pdf

Total revenues collected by Feds in '00 = $2,025 billion
(33.6% of consumer price [per Robbin's 1999 federal tax contribution to prices] )

Those tax components which will not change prices as a consequence of enactment of HR2525

Individual Income Tax (Labor) = $1,004.5 billions,
Employee half of Social Insurance = 648/2 = 324.0 billions,
Excises = $68.9 billion
Customs Duties = $19.9 Billion
Miscellaneous = $42.7 Billion
Estate and Gift taxes = $29.0
============================

Total constant price factors = $1,489.0 billion
Remainder federal tax components affecting price = (2,025 - 1,489) = $536 billions

Adjust for a conservative $800 billion cost of tax compliance,
(The Flat Tax; Hall & Rabushka, '95,What the Income Tax Costs the American People: quoting James L. Payne estimates 65cents for each dollar of revenue collected)

Total tax related factors affecting consumption price = (800 + 536) = $1336 billions

Estimated change in consumption prices as consequence of enactment of a National Retail Sales Tax, repealing all business income and payroll taxes:

33.6*(1,336.5/2,025) = 22.18% reduction in consumption prices

Which more than verifies the Jorgenson empirical study of a 22% fall in producer prices
The two sources are in reasonable agreement, and I see 20-25% a reasonable value to expect retail prices to fall, not only for customers here in the United States, but in our exports as well making them far more competitive on international markets.

So, when the correct numbers are used, my methodology does indeed validate against a drop of at least Jorgenson's 22%.

Just using static analysis taking the repeal of SS/Medicare taxes as well as income taxes into account for HR25. Accounting for productivity enhancements and other economic growth factors would add to the potential for decline in consumer prices as can be determined from Jorgenson's studies! But would be beyond the scope of this validation.

Sorry all your effort still comes to a stab on the margin YN,. Though thanks for the the more accurate revenue figures based on actual receipts for that year instead of the CBO estimates I had to originally used back in mid 2000 when this calc was first done. Special thanks as well at catching the Gift/Estate thing though I suspect that will be gone anyway before long should Repubs be sucessful in getting Bush re-elected and there tax cutting plans implemented in the next four years..

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NRST Base - 2003	$8,865 billion
Mythical Price Reduction (22% of Base) in $	$1,950 billion
Total Corporate Tax - 2003 (including business portion of FICA)	$565 billion
Remainder (corporate tax compliance costs???)	$1,385 billion